THE TREND IS TO SPEND

May 11, 2016

Source: FE CREDIT

The outlook of the Vietnam economy is promising. As free trade agreements are signed, from ASEAN Economic Community (AEC) and the European Union – Vietnam Free Trade Agreement (EVFTA) to the Trans Pacific Partnership (TPP), the opportunities of growth are, to use a word recently used by a group of Vietnamese and foreign business leaders, “awesome”. Just the EVFTA alone is expected “to bolster trade and investment by 25-35% between the two markets.”[1] Meanwhile, the Vietnam government continues to break down barriers to further facilitate both trade and investment. While still many challenges need to be faced, all stakeholders are optimistic. Vietnam is getting ready for substantial and sustainable growth.

Purchasing power is on the rise

There is a marked propensity among customers to save. At the same time however, disposable income and discretionary expenses have been growing steadily. More and more customers become receptive to the idea of leveraging their income to finance the purchase of useful durable goods and avail various types of services to improve their lifestyles. According to Tradingeconomics.com in 2020 the Vietnamese consumers are forecasted to spend a robust 40%+ more than in 2016. This is a result of population growth, but also increased purchasing power. Around 50% of Vietnam’s population is in the age group of 16 – 41. They differ remarkably in their financial habits from their parents. Their trend is to spend more.

The dynamics of the consumer finance market

In the business of consumer finance you need to know your customers’ behaviors. With Vietnam’s rapid development its new generations catch up with the times. To understand the Vietnamese generations you need to know the country’s recent history and the impact on its people. This history differs significantly from European and American history, where World War II (1939-1945) determines their generations of War Babies, Baby Boomers, Generations X, and Y – the Millennials. In Vietnam war ended in 1975. The country has its own “War Babies” and “Baby Boomers”, born three decades after the Western ones. Due to its own but also global developments, Vietnam has no Generation X. Its “Generation 9X” shares characteristics with the Western Millennials. But there are differences. For the consumer finance industry it is important to understand the behaviors of Vietnamese Baby Boomers and Generation X’ers. They are now between 16 – 41, and comprise almost 50% of the population.

The Vietnamese Baby Boomers

Most Vietnamese Baby Boomers – born between 1975 and 1990 – are now well-established in their careers and have families with young children. They comprise almost 30% of the population. Having grown up in hard times and with traditional values, they have been the first to pick the fruits of Vietnam’s rebirth. With one leg they stand in tradition, with the other leg in the 21st Century. They aim for quality of life and living. They don’t look back, but ahead. They work hard for their family to create a life of comfort and pleasure. While their parents – the Vietnamese War Babies – grew up in a world where survival meant saving, the Vietnamese Baby Boomers have grown up in families who had more and more money to spend. They pioneered our Digital Age and witnessed an explosion of products to enhance life. They are the first brand-conscious buyers. They keep a close eye on each other’s career status. They spend on better living conditions, go for material wealth, and invest in their children’s education. The Baby Boomers form the biggest market for consumer finance products. They save, but prefer to spend.

The Vietnamese Millennials: generation “9X”

Many Vietnamese Millennials – 20% of the population, born between 1990 and 2000 – have started their careers. Older ones are starting families. Their philosophy is flexibility and freedom. In the main cities “9X” couples tend to move out of their family homes. They want to have their own place to live. They stand with both legs in the modern era and embrace change. The Vietnamese Millennials’ needs are clear: from a stylish motorbike to the latest model smart phone. With settling down come new needs for consumer durable products: from tv-set to fridge and washing machine. Their brand-awareness dominates: keen users of social media and active in comparing what’s on offer online. They go for good deals: high quality, low price. They are the fastest growing consumer finance industry’s market segment. The Millennials want a credit card to enable them to satisfy their immediate buying needs. Many will qualify to get one within the next 5 years.

Growth results in increased spending

It is expected that with its growth, the Vietnamese salaries will increase. Meaning more buying power and less risk for providers of consumer credit. With steady economic growth and a positive outlook, and 50% of its population spending their earnings on elevating their living standards, Vietnam has a sound investment climate where consumer lending is concerned. FE CREDIT is fully aware of these demographic developments and trends. A wise investor jumps on the band wagon and enjoys the ride.

Over the past five years, FE CREDIT has served nearly 3 million Vietnamese customers across Vietnam who despite earning a decent income, are often neglected by banks. FE CREDIT has achieved its market leading position thanks to pioneering in providing the most advanced products and services from personal loans, two-wheeler loans, consumer durables loans, credit cards.

September 30, 2015 FE CREDIT was awarded by the Global Banking & Finance Review (GBAF – the United Kingdom) the title of “Best Consumer Finance Company Vietnam 2015”.

FE CREDIT is expanding its distribution channels (in particular, digital media, improving its IT systems and continuously developing its risk management practices by benchmarking with the world’s best practices.